State’s economic growth excellent despite lack of central funds: Udhayachandran

CHENNAI: Finance Secretary T Udhayachandran on Friday described the state's financial management as ‘excellent’ and highlighted its ability to maintain ‘sustained growth’ despite not receiving funds from the union government.

He further remarked that had the state received its due share of funds and grants from the Centre, it could have significantly reduced its debt.

Udhayachandran also emphasised that the state is focusing on sunrise sectors, such as the semiconductor industry, which has the potential to attract substantial investments and enable the state to remain at the forefront of the nation's economic growth.

The budget for the fiscal year 2025-2026 has been designed to be inclusive, striking a balance between welfare schemes and development projects. It was formulated after extensive consultations with various sectors of society, including renowned economists to gram panchayat presidents, members of the TN CM's advisory council to NGOs, and even suggestions in social media taken into account, the finance secretary told journalists after presenting the budget, which stands at Rs 4.39-lakh crore — an increase of 9.95% over the revised estimate for 2024-25.

The state's economic growth has surpassed the national average and as a result, its financial deficit is steadily decreasing, and Udhayachandran expressed confidence in a 14.6% increase in the state's tax revenue (SOTR) for 2025-26.

On the issue of debts, the Finance Secretary stated that debt should be viewed in ‘absolute numbers’ rather than as a proportion of the budget size. This year, the state government plans to borrow Rs 1.05 lakh crore, bringing the total estimated debt to Rs 9-lakh crore.

"Our debt is well within the permissible limit under the Fiscal Responsibility and Budget Management Act, which allows a state to borrow up to 28% of its GSDP. At present, our debt is less than 26% of the GSDP," he explained.

"We had initially estimated a revenue deficit of Rs 49,000 crore for 2024-25. However, this has now been reduced to Rs 46,000 crore, a decrease of Rs 3,000 crore. We expect further reductions in the coming fiscal year. This is despite not receiving the funds from the Union Government; had they been disbursed, the deficit would have been even lower," he added, referring to the Centre's refusal to release Rs 2,152 crore under the Samagra Shiksha scheme (Integrated School Education Scheme).

The state anticipates capital expenditure of Rs 57,000 crore for the next fiscal year, he said and also noted that the state's GST revenue collection is performing well, with a 22% growth, and reiterated that the government is committed to investing in infrastructure projects in key sectors such as roads and bridges, transport and energy, and urban development.

Focus on sunrise sectors: The state government is placing significant emphasis on the semiconductor sector, which holds immense potential, with testing facilities being central to its development. The government is closely monitoring and analysing the global economic landscape to achieve the ambitious goal of a $1 trillion economy. As such, the state is particularly focused on fostering emerging industries.

On the reforms that have contributed to the state's financial prudence, Udhayachandran explained that funds are being released to departments in a 'just-in-time' manner. This approach has allowed the government to redirect Rs 11,000 crore, which was previously unspent and lying dormant in banks, towards funding essential schemes. This strategy has contributed to effective financial management and reduced the borrowing requirement by Rs 3,600 crore last fiscal year.

The government is also exploring the development of a Regional Rapid Transit System (RRTS) between Chennai and Villupuram. "It will be like a mini bullet train, travelling at speeds of 160 km/h with fewer stations. This will allow passengers to reach Chennai within 25 minutes. We will seek funding from the Union Government for this project. Additionally, we are focusing on developing infrastructure to further enhance the state's economic growth and meet future needs," he added.

Focus on digital economy: Udhayachandran also highlighted the government's focus on the "grey area" of the digital economy and services. He noted that extensive data exchange with relevant agencies is ongoing to explore opportunities for increasing state revenue through the digital economy.

KEY POINTS:

Total disbursement: Rs 4,39,293 cr

Total receipts: 3,32,330 cr

State’s revenue: Govt projects its revenue receipts at Rs 3,36,569 cr. SOTR constitute 75.3% of total revenue receipts, the balance Rs 24.7% from Central taxes and grants-in-aid from Union govt

SOTR -- Rs 2,20,895 cr

State own non-tax revenue -- Rs 28,818 cr

Grant-in-aid from Centre - Rs 23,834 cr

Share in Central taxes - Rs 58,022 cr

SOTR is estimated to increase by 14.6% in 2025-26

Components -- Commercial taxes 74.2%, stamps & registration 11.8%, state excise 5.9%, motor vehicles taxes 5.9%, motor vehicle taxes 6.1% and others 2.0%

State revenue expenditure -- Rs 3,73m2024 cr

Salaries - Rs 90,464 cr

Operation and maintenance - Rs 16,972 cr

Subsidies and grants - Rs 1,53,972 cr

Pension/retirement benefits - Rs 41,290 cr

Interest payments - 70,754 cr

Capital expenditure - total capital expenditure Rs 57,231 cr

Roads & Bridges - Rs 18,197 cr

Transport & energy - Rs 10,973 cr

Urban development - Rs 6,292 cr

Water supply schemes - Rs 6,231 cr

Water bodies - Rs 4,465 cr

Education & health - Rs 3,851 cr

Revenue deficit is estimated at Rs 46,467 cr in the revised estimate for 2024-25 and Rs 41,635 cr in the budget estimate for 2025-26

Trend in revenue deficit as % of GSDP

2020-21 - 3.49%, 2021-22 - 2.25%, 22-23 - 1.51%, 23-24 - 1.66%, 24-25 yr - 1.49% and 25-26 yr - 1.17%

Fiscal deficit expected to reduce to 3% in 25-26 yr from 3.26% in RE 2024-25

How one rupee is mobilised

Public debts - 31.4%, SOTR - 45.6%. SONTR - 5.9%, share of central taxes - 12%, grants-in-aid from Union govt - 4.9%, recovery of loans & capital receipt 0.2%

How one rupee spent

Operation & maintenance - 3.5%

Repayment of debt - 9.7%

Capital expenditure - 11.8%

Interest payments - 14.5%

Salaries - 18.6%

Pension & retirement benefits - 8.5%